propensity to import

Fig. 163 Propensity to import. The effect of an increase in the propensity to import on national income.

Fig. 162 Propensity to consume. The effect of an increase in the propensity to consume on national income.

propensity to import

The average propensity to import (APM) is given by:

The marginal propensity to import (MPM) is the fraction of any change in income spent on imports:

marginal propensity to import (MPM)

Alternatively, imports can be expressed as a proportion of DISPOSABLE INCOME.

A rise in the propensity to import decreases consumption expenditure on domestically produced output for a given income level, for example, from OC to OC1 in Fig. 163. This increases the imports withdrawal from the CIRCULAR FLOW OF NATIONAL INCOME and reduces national income from OY to OY1.See MULTIPLIER, IMPORT PENETRATION.